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What is a Captive Insurance Company and How Can it Benefit Your Clients?

A captive insurance company is a vehicle that allows a company or group to manage some of their own risks as part of an overall risk management strategy. It is a licensed and regulated insurance or reinsurance company whose business is supplied and controlled by its owners who are the principle insureds.

A captive insurance company can provide for better control of risk management and opportunities to reduce costs. Captive insurance laws in Missouri allow for a variety of flexible options to manage your mainstream as well as non-traditional risks where traditional insurance coverage may not be readily available or best suited for your particular needs. Captive Insurance Companies are licensed and regulated by the Missouri Department of Insurance Financial Institutions and Professional Registration (DIFP).

Some of the Advantages of Captive Insurance Companies

Captive Insurance Companies are an option for many types of companies and groups to take financial control and manage of their own risks rather than paying premiums to a third party insurer.

Some of the advantages your company could realize include:

  • Coverage tailored to your specific needs
  • Premium based on your loss experience, not industry average
  • Reduced operating costs. Increased coverage and capacity
  • Investment income used to fund losses
  • Direct access to wholesale reinsurance markets
  • Funding and underwriting flexibility
  • Greater control over claims and incentive for loss control
  • Additional negotiating leverage with underwriters
  • Flexibility in managing risk


Reasons and Benefits of Forming a Captive in Missouri

  • If you are located in or near Missouri, you can keep your captive close to home to minimize or eliminate travel expenses and maximize control and management of the captive. We border eight states which makes same day travel from the North, South, East or West on our system of Interstate and US highways possible.
  • If you are not located in or around Missouri, there are daily non-stop flights between our two major metropolitan areas and most cities across the country. In most cases there’s no need for connecting flights and all day travel for a simple meeting with our staff or with your captive company management.
  • Our captive laws offer several options for businesses and are specifically designed to minimize the need for mandated regulation and oversight.
  • Simplified application review process with your known review costs stated up front. Further, the initial licensing fee and subsequent annual renewal fees can then be fully deducted from future premium taxes. The actuarial review fee paid to the DIFP’s consulting firm cannot exceed the maximum stated cost, no matter how complex.
  • The DIFP has the experience and flexibility to provide the level of regulation needed for nearly any situation. The DIFP regulates over 3,000 insurance companies, ranging from domestic companies with members of some of the worlds largest groups to small farm mutual companies that operate out of an officer’s home.
  • The DIFP has significant experience and expertise relating to reinsurance. Members of some of the world’s largest reinsurance groups are domiciled in the state. A fulltime reinsurance expert is on staff to assist in processing filings and has streamlined the review process. Due to confidence in our review process, our laws have incorporated a 60 day window for the DIFP to decide on a completed application for a special purpose life reinsurance captive.
  • There is a significant amount of insurance expertise in the state. The National Association of Insurance Commissioners is headquartered in Kansas City and all the major accounting and actuarial firms have office locations in our state. You’ll find plenty of support services available to meet your captive’s needs.
  • Missouri is a state with a rich history, strong traditions and a bright future. From small communities to large metropolitan areas, Missouri welcomes millions of visitors each year to discover all of the features that make our state extraordinary. Missouri is a great place to live, do business in, or relocate to.


Types of Captive Structures Available in Missouri

Pure Captive

These types of captives are designed to insure the risks of its parent, affiliated companies or controlled unaffiliated companies. They can be incorporated as a stock insurer, non-profit corporation or limited liability company. Minimum capitalization is $250,000. No investment limitations, reports annual financial information on a GAAP basis.

Association Captive

These types of captives are designed to insure the risks of the member organizations of the association and their affiliated companies. They can be incorporated as a stock insurer, mutual insurer, limited liability company or reciprocal. Minimum capitalization is $750,000. Investment limitations are similar to a typical P&C company, reports annual financial information on a SAP basis.

Industrial Insured Captive

These types of captives are designed to insure the risks of the industrial insured group and their affiliated companies. They can be incorporated as a stock insurer, mutual insurer or a limited liability company. Minimum capitalization is $500,000. No investment limitations, reports annual financial information on a GAAP basis.

Branch Captive

Alien captive insurer licensed to insure the same risks as a pure captive for its branch operations in Missouri. Minimum $250,000 placed in trust, irrevocable letter or credit or other acceptable assets for the benefit of US policyholders. No investment limitations, reports annual Missouri branch financial information on a GAAP basis.

Special Purpose Life Insurance Captive

These types of captives are designed to reinsure the risks associated with the written or assumed, life, annuity, accident or health insurance business of the ceding insurance company and its affiliates. May be formed as a stock corporation, a Missouri statutory close corporation, limited liability company or other form approved by the Director. Minimum capitalization is $250,000. Investment limitations are similar to a typical Life & Health company, reports annual financial information on a SAP basis

All life, accident and health and annuity insurance products and most commercial property and casualty coverage can be insured or reinsured through your Missouri captive, subject to all state and federal requirements. No direct writing of workers compensation, employer’s liability, private passenger automobile or homeowners insurance coverages are allowed. However, Missouri captives may reinsure qualified self-funded workers compensation plans or provide excess workers compensation coverage.


Steps to Forming a Captive Insurance in Missouri

  • Prepare documents required for organization or incorporation in Missouri.
  • Prepare documents necessary to complete the captive application.
  • Submit two copies of the information required under steps 2 and 3 to the DIFP: Attention Captive Program Manager. Include the $7,500 licensing fee. (This is fully deductible from future premium taxes).
  • Petition the director to issue a Certificate of General Good. The factors that will be reviewed prior to issuing the certificate are detailed under section 379.1310.4.
  • Present the Certificate of General Good and organizational documents noted in step 2 to the Missouri Secretary of State’s Office along with the fee required to incorporate or organize the captive.
  • Place minimum capital in the captive and provide evidence of deposit to the DIFP.
  • Receive notification from the contracted actuarial review firm as to the cost and timing of the issuance of its actuarial feasibility opinion. The maximum review fee is $4,000.
  • Upon issuance of the actuarial feasibility opinion, the applicant will be invoiced the quoted cost and must pay the fee directly to the contracted actuarial firm.
  • DIFP will notify the applicant when the license has been issued, usually in about 30 days from completed application receipt.


Steps to forming a special purpose life reinsurance captive

  • Prepare documents required for organization or incorporation in Missouri. Advice of a local attorney may be necessary.
  • Prepare documents necessary to complete the captive application.
  • Submit two copies of the information required under steps 2 and 3 to the Missouri DIFP: Attention Captive Program Manager. Include the $10,000 application fee. (This is fully deductible from future premium taxes).
  • Receive notification from the contracted actuarial review firm as to the cost and timing of the issuance of its actuarial feasibility opinion. The maximum review fee is $8,000.
  • Upon department direction, submit $7,500 licensing fee for license issuance. (This is fully deductible from future premium taxes due). Mandated decision time is 60 days from completed application receipt.


Other requirements

  • If your captive will be using a management firm, that firm must be approved by DIFP. The firm can contact the Captive Program manager for details.
  • Your CPA firm must be approved prior to conducting your audit.
  • The actuary you decide to use to render an opinion on reserves must be approved prior to issuing the opinion on reserves.